Mexico inflation seen slowing in Jan even as risks persist - central bank chief


MEXICO CITY, Jan 7 (Reuters) - Inflation in Mexico is expected to slow in January even as risks persist that could push prices back up, the head of the country's central bank said in an interview on Sunday.

Alejandro Diaz de Leon, who took over the bank last month, said on local broadcaster Foro TV that while January data reveals a "marked change" away from rising inflation, risks such as unresolved trade talks with the United States and Canada and Mexican elections later this year could still influence prices.

"In January, we will have a downward inflection a little more influenced by the fact that the increase in gasoline (prices) will no longer be in the annual measurement," said Diaz de Leon.

The central banker was referring to fuel price spikes of as much as 20 percent at the beginning of 2017 as the government sought to end a long-standing policy of subsidizing fuel prices.

In mid-December, the Banco de Mexico board that Diaz de Leon leads raised its key rate MXCBIR=ECI by 25 basis points to 7.25 percent, its highest in nearly nine years.

Earlier in the month, inflation reached 6.69 percent, near its highest level in 16 years.

Diaz de Leon added that the central bank has at its disposal the appropriate instruments to guide an orderly adjustment of the peso currency in case the risks materialize.

In late December, the bank increased the amounts it offers in foreign exchange hedges used to support the peso and drawn from a program set up last year to reduce exchange rate volatility.

Diaz de Leon has previously said that Mexico's peso faces an "adverse environment" in 2018 due to the recently enacted U.S. tax reform, upcoming elections in Mexico and uncertainty over the renegotiation of the North American Free Trade Agreement. (Reporting by David Alire Garcia and Noe Torres; Editing by Shri Navaratnam)